Flat Rate vs Reducing Balance Calculator
Understand the true cost difference between flat rate and reducing balance interest calculation methods. Make informed borrowing decisions.
Important: Know Your True Cost!
A flat rate of 10% is NOT the same as a reducing balance rate of 10%. The effective interest rate for flat rate loans is approximately 16.67%, nearly double the quoted rate. Always compare the effective annual percentage rate (APR) when evaluating loan offers.
Loan Details
Enter loan information for comparison
Effective Flat Rate
16.67%
The true cost of a 10% flat rate loan
Comparison Summary
Side-by-side cost analysis
Flat Rate Method
Monthly EMI:₹25,000
Total Interest:₹5,00,000
Total Payment:₹15,00,000
Effective Rate:16.67%
Reducing Balance Method
Monthly EMI:₹21,247
Total Interest:₹2,74,823
Total Payment:₹12,74,823
Effective Rate:10.00%
Savings with Reducing Balance
₹2,25,177You save 45.0% in interest by choosing reducing balance over flat rate method at the same quoted rate of 10%.
Year-wise Interest Comparison
See how interest differs each year between both methods
Total Cost Comparison